Sep. 11, 2012 at 10:08 AM ET
The U.S. trade deficit grew slightly in July, a small bit of negative news for the U.S. economy, as exports to Germany, France and other European nations shrank and imports from China soared to a new record.
The monthly trade shortfall was $42 billion, compared to a downwardly revised estimate of $41.9 billion for June, as both overall imports and exports declined.
But analysts surveyed before the report had expected a bigger trade deficit of around $44 billion.
The ongoing debt crisis in Europe appeared to be taking a toll on demand, with U.S. exports to the 27 nations of the European Union falling 11.7 percent in July.
Exports to Germany were the lowest since February 2010 and the trade gap with the EU was the biggest since October 2007.
"The global volume of trade is slowing because of the weakening global economy, but the ripples in the U.S. have not been too severe so it's not a growth stopper at all. There is no indication the GDP in the third quarter should be revised down," said Pierre Ellis, senior global economist, at Decision Economics in New York.
The U.S. economy grew at just a 1.7 percent annual rate in the second quarter of this year. Growth in the third quarter is expected to show improvement, but the jobless rate remains stubbornly high at over 8 percent.
"In short, the report suggests that exports are starting to weaken, although the statistical impact on GDP will probably be neutralized by relatively weak imports as well," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.
The Federal Reserve's policy-setting group meets on Wednesday and Thursday and many analysts believe it may launch a third round of bond buying to keep borrowing costs low and breathe more life into the recovery.
The high jobless rate and spotty recovery also is seen as a hurdle to President Barack Obama's re-election bid, though the latest opinion surveys give Obama an edge over his Republican challenger Mitt Romney as the November polls approach.
U.S. stocks opened higher on Tuesday as traders focused on the Fed and developments in Europe, while Treasuries eased and the dollar slid against the yen.